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Reverse Mortgage

Updated on September 2, 2014

What is a Reverse Mortgage Loan?

A Reverse mortgage loan is the exact opposite of the typical home equity mortgage loan. In a home equity loan, you pay a monthly sum for a certain numbers of years until the loan is fully paid. In a reverse mortgage, instead of you paying for a monthly equity, it's you who get a monthly payout or a lump sum.

Reverse mortgages, available to people older than 62 who own their homes outright or have only minimal home-loan debt, allow borrowers to receive funds in a lump sum, as monthly payments, through a line of credit, or some combination thereof.

Unlike other home equity loans, no repayment is due on a reverse mortgage unless and until the borrower passes away or no longer occupies the mortgaged home.


How a Reverse Mortgage Works

Types of Reverse Mortgage

Home Equity Conversion Mortgage

The most popular and widely available type of reverse mortgage. Provides the largest loan advances, gives you the most choices on how the loan is paid to you, and most of all, you can use the money for whatever purposes that you may have in mind.

Proprietary Reverse Mortgages

This type of reverse mortgage can provide larger loan amounts than the Home Equity Conversion Mortgage program, but they are generally the most expensive type of reverse mortgage. But even if you could get a larger loan amount from a proprietary plan, it might not actually provide you with more in total loan advances than a HECM would provide.

DPL (Deffered Payment Loans)

This type of reverse mortgage loan is usually offered by local and some state government agencies for repairing or improving homes. This type reverse mortgage provides a onetime, lump sum advance.

Property Tax Deferral

This type of public sector reverse mortgage generally provides annual loan advances that can be used only to pay your property taxes. The amount of the annual PTD loan advance is generally limited by the amount of your property tax bill for that year. Some programs limit the annual advance to some part of the tax bill, or to a specific amount.

Dangers of Reverse Mortgages

Reverse Mortgage Pros and Cons

Reverse mortgage can provide a convenient way to increase one's income during retirement, but it also has its own drawbacks. The mortgage fee (interest rate, loan origination fee, mortgage insurance fee, etc.) is higher compared to other types of mortgages. Also, if you need to move permanently from your home (like entering a care facility) the loan becomes due and payable.

Comments on Reverse Mortgage

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    • KoffeeKlatch Gals profile image

      Susan Hazelton 

      8 years ago from Sunny Florida

      Great information. I will pass this on to my mother. I think it might be considered ok in some circumstances. If you have no surviving realatives, don't want to live in a nursing home , or if don't have enough money to live month to month. It's something that needs to be thought about long and hard before you get into something you can't get out of.

    • firthgary profile image

      firthgary 

      8 years ago

      Grat info thanks

    • PureRomance profile image

      PureRomance 

      8 years ago from Vietnam

      it gains my knowledge, thanks :)

    • killuminati profile image

      killuminati 

      8 years ago

      Very nice :)

    • Albertttt profile image

      Albertttt 

      8 years ago

      I enjoyed it.

    • BrokeDrake profile image

      BrokeDrake 

      8 years ago

      Nice Hub Love.

    • AnywhereGardener profile image

      AnywhereGardener 

      8 years ago

      Thank you for welcoming me on my first hub. This is good advice, to stay out of debt as much as possible. Loans can help in some instances the main point is to be aware of what you are signing, to read and be sure and understand all of the fine print, if you sign, you have no recourse. It is so sad how the greedy ones take advantage of the elderly or less sophisticated, trusting people.

    • profile image

      ZACHARIAH 

      8 years ago

      hey nice info

    • profile image

      Fayettevillehomes 

      8 years ago

      Nice hub Angel! I am with you on the credit and loans fiasco, did it once...never again!

    • vpolisi profile image

      vpolisi 

      8 years ago from Atlanta, GA

      Angel- this is a great HUB! Reverse mortgages are generally a bad thing, but for people who have no other option it can allow them to live out their final years with some quality of life.

    • profile image

      Best Home Alarms 

      8 years ago

      Angel, great hub - I am going to pass this to my parents who have been thinking of getting one!

    • Lgali profile image

      Lgali 

      8 years ago

      thansk for useful info

    • AndyK26 profile image

      AndyK26 

      8 years ago

      should of read this article a couple of years ago :( hope it helps others

    • Angel Of Love profile imageAUTHOR

      Angel Of Love 

      8 years ago

      Angel and Diecast Guy, I agree with both of you that one should stay away from any kind of credit if at all possible. Loans and mortgages should be a last resort since you'll be wasting money with interests and processing fees.

    • mdburks profile image

      mdburks 

      8 years ago

      Nice Information. Thank you.

    • Diecast Guy profile image

      Diecast Guy 

      8 years ago from Toronto,Ontario,Canada

      Nice hub Angel, and you are right, stay away from credits and banks they are only nice to you if you have something that they want. I wish I would have listened to myself and stayed away from using credit cards.

      Good job

      Carmine

    • profile image

      Angel 

      8 years ago

      The banks for the Mafia as you have seen them lurking like a dragon around your home. If you have any equity, as you can imagine, probably most of the senior would have, then you are eligible for the reverse mortgage. In this case, the bank hoping that you as a senior citizen will die soon so that they can take over the home for the price what they paid for as a reverse mortgage. If you really want to live your life peacefully then get out of this credit concept, because if you buy anything on credit, it will hunt you down one way or the another.

    • tudsanee profile image

      tudsanee 

      8 years ago

      Nice

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